Exhibit 10.1
XXXXXXX COMPANY
200_ LONG-TERM INCENTIVE AWARD AGREEMENT
(Under the Xxxxxxx Company 2003 Long-Term Incentive Plan)
TO: [Employee's Name]
RE: Notice of Long-Term Incentive Award
Dear: ___________________
This is to notify you that Perrigo Company (the "Company") has granted you
an Award under the Xxxxxxx Company 2003 Long-Term Incentive Plan (the "Plan"),
effective as of _____________, 200_ (the "Grant Date"). This Award consists of
three different types of incentives: a nonqualified stock option, shares of
service-based restricted stock, and performance-based restricted stock units.
The terms and conditions of each of these incentives are set forth in the
remainder of this agreement (the "Agreement"). The capitalized terms that are
not otherwise defined in this Agreement shall have the meanings ascribed to such
terms under the Plan.
SECTION 1
NONQUALIFIED STOCK OPTION
1.1 Grant of Option. As of the Grant Date, and subject to the terms and
conditions of this Agreement and the Plan, the Company grants you a nonqualified
stock option (the "Option") to purchase __________ shares of the Company's
common stock, without par value ("Common Stock"), at a per-share price of
$________ (the "Option Price"), which is equal to the Fair Market Value of such
Common Stock as of the Grant Date.
1.2 Timing and Duration of Exercise.
(a) The Option shall vest on the dates set forth below (each a
"Vesting Date" and, subject to the requirements of subsection (b) below,
may be exercised after such Vesting Dates to purchase the number of shares
of Common Stock set forth opposite each such date:
Vesting Date Vested Shares
------------ -------------
Notwithstanding the above vesting schedule, any portion of the Option that
has not vested or been forfeited previously shall immediately vest in full
and, subject to subsection (b) below, may be exercised in whole or in part
at any time after (1) the occurrence of a Change of Control that occurs
while you are employed by the Company or one of its subsidiaries, or (2)
your death, Disability, or Retirement.
(b) Except as provided below, the Option to purchase vested shares
must be exercised by you, if at all, while you are an employee of the
Company or one of its subsidiaries or within three months following your
Termination Date, but in no event after (Date + 10 years, minus one day)
(the "Expiration Date"). If your Termination Date occurs by reason of your
Retirement, death or Disability, the Option may thereafter be exercised by
you, or in the event of your death, by your estate or your designated
beneficiary, or in the event of your Disability, by you or your legal
representative, at any time prior to the Expiration Date. If you die after
your Termination Date and during the period in which the Option is
exercisable, the right to exercise the Option during such period will be
governed by Plan Section 11(d). If your Termination Date occurs because of
Involuntarily Termination for Economic Reasons as determined by the Chief
Executive Officer (or the Committee in the case of an Employee subject to
Section 16 of the Exchange Act), the terms of Plan Section 11(b) shall
apply.
Any portion of the Option that is not vested pursuant to this Section
1.2 as of your employment Termination Date will be forfeited immediately.
If the Option is not exercised as to all of the vested shares covered by
the Option within the applicable time period and in the manner provided
herein, the Option will terminate and will not be exercisable thereafter.
1.3 Method of Exercise. The Option, or any part of it, shall be exercised
by written notice directed to the President, Chief Financial Officer or
Secretary of the Company at the Company's principal office in Allegan, Michigan,
or by using some other notification permitted by the Company. Such notice must
satisfy the following requirements:
(a) The notice must state the Grant Date, the number of shares of
Common Stock subject to the Option, the number of shares of Common Stock
with respect to which Option is being exercised, the person in whose name
the stock certificate or certificates for such shares of Common Stock is to
be registered and the person's address and Social Security number (or if
more than one person, the names, addresses and Social Security numbers of
such persons).
(b) The notice shall be accompanied by check, bank draft, money order
or other cash payment, or by delivery of a certificate or certificates,
properly endorsed, for shares of Common Stock that you have held for at
least six months and that are equivalent in Fair Market Value on the date
of exercise to the Option Price (or any combination of cash and shares), in
full payment of the Option Price for the number of shares specified in the
notice.
(c) The notice must be signed by the person or persons entitled to
exercise the Option and, if the Option is being exercised by any person or
persons other than you, be accompanied by proof, satisfactory to the
Committee, of the right of such person or persons to exercise the Option.
SECTION 2
RESTRICTED SHARES - SERVICE-BASED VESTING
2.1 Grant of Restricted Shares. As of the Grant Date, and subject to the
terms and conditions of this Agreement and the Plan, the Company grants you
___________ shares of Common Stock ("Restricted Shares").
2.2 Vesting. Except as provided in Section 2.3, the Restricted Shares
awarded hereunder shall vest if the Employee remains continuously employed by
the Company until the following date (the "Restricted Shares Vesting Date"):
Vesting Date Number of Shares Vesting
------------ ------------------------
(Date) (Shares)
Except as provided in Section 2.3, if the Employee's Termination Date occurs
prior to the Restricted Shares Vesting Date, the Restricted Shares awarded under
this Agreement shall be permanently forfeited on the Employee's Termination
Date. The "Restricted Period" with respect to a Restricted Share awarded under
this Agreement is the period beginning on the Grant Date and ending on the
Restricted Shares Vesting Date (or, if earlier, the date the Restricted Shares
vest under Section 2.3).
2.3. Special Vesting Rules. Notwithstanding Section 2.2 above:
(a) If the Employee's Termination Date occurs by reason of death,
Disability or Retirement with the Company's consent, any Restricted Shares
awarded under this Agreement that have not vested prior to such Termination
Date shall become fully vested.
(b) If the Employee's Termination Date occurs by reason of Involuntary
Termination for Economic Reasons, any Restricted Shares awarded under this
Agreement that would otherwise be scheduled to vest under Section 2.2 in
the 24 month period following such Termination Date shall vest on the
Termination Date. Any Restricted Shares that are not scheduled to vest
during such 24 month period will be permanently forfeited on the
Termination Date.
(c) In the event of a Change in Control of the Company, all Restricted
Shares that have not vested or been forfeited prior to the date of such
Change in Control shall become fully vested on such date.
2.4 Terms and Conditions of Restricted Shares. The Restricted Shares
granted under this Agreement shall be subject to the following additional terms
and conditions:
(a) Except as may otherwise be specifically permitted under the Plan,
Restricted Shares may not be sold, assigned, pledged or otherwise
encumbered prior to the end of the Restricted Period.
(b) Except as otherwise provided in this Agreement, the Employee shall
have all of the rights of a stockholder, including, but not limited to, the
right to vote such shares and the right to receive dividends paid on such
shares.
(c) The stock certificate(s) representing the Restricted Shares shall
be issued or held in book entry form. If a stock certificate is issued, it
shall be delivered to the Secretary of the Company or such other custodian
as may be designated by the Company, to be held until the end of the
Restricted Period or until the Restricted Shares are forfeited. Any
certificates representing Restricted Shares granted pursuant to this
Agreement shall bear a legend in substantially the form set forth below:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) contained in the Xxxxxxx Company 2003
Long-Term Incentive Plan and an agreement entered into between
the registered owner and Xxxxxxx Company. A copy of such plan and
agreement is on file in the office of the Secretary of Xxxxxxx
Company, 000 Xxxxxxx, Xxxxxxx, Xxxxxxxx 00000."
As soon as practicable after the Restricted Period ends with respect to
Restricted Shares that have not been forfeited, the Company shall transfer share
certificates to the Employee, free of all restrictions; provided, however, the
Company may withhold unrestricted shares otherwise transferable to the Employee
to the extent necessary to satisfy withholding taxes due by reason of the
vesting of the Restricted Shares, in accordance with Section 4.6.
SECTION 3
RESTRICTED STOCK UNITS - PERFORMANCE-BASED VESTING
3.1 Grant. As of the Grant Date, the Company grants to the Employee
________________ restricted stock units ("Restricted Stock Units" or "RSUs"),
subject to the terms and conditions set forth in this Agreement. The number of
Restricted Stock Units awarded in this Section 3.1 is referred to as the "Target
Award." The Target Award may be increased or decreased depending on whether the
Company attains certain performance goals as described in Section 3.2. Each
Restricted Stock Unit shall entitle the Employee to one share of Common Stock on
the RSU Vesting Date set forth in this Agreement, provided the applicable
performance goals are satisfied.
3.2 Vesting. The number of Restricted Stock Units vesting, if any, shall be
determined as of the RSU Vesting Date (defined below). That number will be
determined based on the average level of attainment of annual Target Net Income
Growth (defined below) for each fiscal year in the Performance Period (defined
below), in accordance with the following schedule:
Level of % of Target Award
Attainment RSUs Payable
---------- -----------------
Threshold _____%
Target _____%
Maximum _____%
The Committee shall establish annually the Target Net Income Growth and the
percentage of Target Net Income Growth that must be attained for Threshold and
Maximum performance for a fiscal year. The goals for the 200_ fiscal year are
set forth in Exhibit A.
Following the end of each fiscal year in the Performance Period, the Committee
will determine the percentage of Target Award RSUs that would be payable under
the foregoing schedule for such fiscal year, based on the percentage of Target
Net Income Growth attained and the Threshold and Maximum performance targets
established by the Committee for that fiscal year. The percentage of the Target
Award that would be payable under the schedule shall be adjusted, pro rata, to
reflect attained performance between Threshold and Target, and Target and
Maximum.
At the end of the Performance Period, the percentage payout for each fiscal year
in the Performance Period will be averaged to determine the actual percentage of
Target Award RSUs that will vest and be payable on the RSU Vesting Date. In no
event will the calculation of a positive payout percentage for any fiscal year
be construed to guarantee that any RSUs will vest on the RSU Vesting Date.
Payout percentages for the individual fiscal years are determined solely for
purposes of determining the average annual payout percentage for the three-year
Performance Period.
Except as provided in Section 3.3, the RSUs will be permanently forfeited if the
Employee's Termination Date occurs prior to the RSU Vesting Date. If the average
annual performance payout for the Performance Period is less than the Threshold
performance level established by the Committee, all RSUs that have not
previously been forfeited shall be forfeited as of the RSU Vesting Date. If the
average annual performance payout for the Performance Period exceeds the Maximum
performance level established by the Committee, in no event will the number of
RSUs vesting exceed ____% of the Target Award.
The following terms shall have the following meanings under this Section 3.
(a) "Net Income" for any fiscal year means the Company's net income
(external operating basis) for the fiscal year and shall be determined in
accordance with generally accepted accounting principles. The Committee shall
provide how Net Income will be adjusted, if at all, as a result of extraordinary
events or circumstances, as determined by the Committee, or to exclude the
effects of extraordinary, unusual, or non-recurring items; changes in applicable
laws, regulations, or accounting principles; currency fluctuations; discontinued
operations; non-cash items, such as amortization, depreciation, or reserves;
asset impairment; or any recapitalization,
restructuring, reorganization, merger, acquisition, divestiture, consolidation,
spin-off, split-up, combination, liquidation, dissolution, sale of assets, or
other similar corporation transaction; provided, however, that no such
adjustment will be made if the effect of such adjustment would cause an award to
fail to qualify as performance-based compensation within the meaning of Code
Section 162(m).
(b) "Performance Period" means the period commencing ___________ and ending
______________.
(c) "RSU Vesting Date" means the last day of the Performance Period.
(d) "Target Net Income Growth" means the targeted growth in Net Income
(external operating basis) for a fiscal year, as set forth in the Company's
annual fiscal year financial plan approved by the Committee and Board. The level
of attainment of Target Net Income Growth will be determined separately for each
of the fiscal years of the Company in the Performance Period, based on the
Target Net Income Growth for that fiscal year. The Committee, in its sole
discretion, shall determine to what degree, if any, that the Target Net Income
Growth has been attained.
3.3 Special Vesting Rules. Notwithstanding Section 3.2 above, in the event
of a Change in Control of the Company, all of the Restricted Stock Units awarded
hereunder that have not previously been forfeited shall become fully vested as
if Target performance had been obtained for the Performance Period effective as
of the date of any such event. If the Employee's Termination Date occurs because
of death, Disability, or Retirement, the Restricted Stock Units shall vest or be
forfeited as of the RSU Vesting Date set forth in Section 3.2, based on the
attainment of the performance goals. If the Employee's Termination Date occurs
because of Involuntary Termination for Economic Reasons, the Company's Chief
Executive Officer (or the Committee, if the Employee is subject to Section 16 of
the Exchange Act), in his sole and absolute discretion, may permit all or part
of the Restricted Stock Units awarded hereunder to remain outstanding and vest
or be forfeited as of the date set forth in Section 3.2, depending on the
attainment of performance goals. To the extent that the Chief Executive Office
(or Committee, if applicable) does not exercise discretionary authority to allow
Restricted Stock Units to remain outstanding on the date of the Employee's
Involuntary Termination for Economic Reasons, such Restricted Stock Units shall
be permanently forfeited.
3.4 Settlement of Restricted Stock Units. As soon as practicable following
the date of the Committee's first regularly scheduled meeting following the last
day of the Performance Period at which the Committee certifies the average
payout for each of the years in the Performance Period, the Company shall
transfer to the Employee one share of Common Stock for each Restricted Stock
Unit, if any, that becomes vested pursuant to Section 3.2 or 3.3 of this
Agreement; provided, however, the Company may settle Restricted Stock Units in
cash to the extent necessary to satisfy any withholding pursuant to Section 4.6.
SECTION 4
GENERAL TERMS AND CONDITIONS
4.1 Nontransferability. Awards under this Agreement shall not be
transferable other than by will or by the laws of descent and distribution.
During your lifetime, the Option granted under this Agreement shall be
exercisable only by you or by your guardian or legal representative in the event
of your disability.
4.2 No Rights as a Stockholder. You shall not have any rights as a
stockholder with respect to any shares of Common Stock subject to the Option or
RSU portion of this Agreement prior to the date of issuance to you of a
certificate or certificates for such shares.
4.3 Cause Termination. If your Termination Date occurs for reasons of
Cause, all of your rights under this Agreement, whether or not vested, shall
terminate immediately.
4.4 Awards Subject to Plan. Enclosed for your review is a copy of the Plan.
The granting of the Awards under this Agreement is being made pursuant to the
Plan and the Awards shall be exercisable or payable, as applicable, only in
accordance with the applicable terms of the Plan. The Plan contains certain
definitions, restrictions, limitations and other terms and conditions all of
which shall be applicable to this Agreement. ALL THE PROVISIONS OF THE PLAN ARE
INCORPORATED HEREIN BY REFERENCE AND ARE MADE A PART OF THIS AGREEMENT IN THE
SAME MANNER AS IF EACH AND EVERY SUCH PROVISION WERE FULLY WRITTEN INTO THIS
AGREEMENT. Should the Plan become void or unenforceable by operation of law or
judicial decision, this Agreement shall have no force or effect. Nothing set
forth in this Agreement is intended, nor shall any of its provisions be
construed, to limit or exclude any definition, restriction, limitation or other
term or condition of the Plan as is relevant to this Agreement and as may be
specifically applied to it by the Committee. In the event of a conflict in the
provisions of this Agreement and the Plan, as a rule of construction the terms
of the Plan shall be deemed superior and apply.
4.5 Adjustments in Event of Change in Common Stock. In the event of a stock
split, stock dividend, recapitalization, reclassification or combination of
shares, merger, sale of assets or similar event, the number and kind of shares
subject to Awards under this Agreement, and the Option Price, where applicable,
will be appropriately adjusted consistent with such change in such manner as the
Committee may deem equitable to prevent substantial dilution or enlargement of
the rights granted to or available for you.
4.6 Withholding. This Award is subject to the withholding of all applicable
taxes. The Company may withhold, or permit the Employee to remit to the Company,
any Federal, state or local taxes applicable to the grant, vesting or other
event giving rise to tax liability with respect to this Award. The Employee may
elect to surrender previously acquired Common Stock or to have the Company
withhold Common Stock relating to this award in an amount sufficient to satisfy
all or a portion of the minimum tax withholding required by law.
4.7 Compliance with Applicable Law. Notwithstanding any other provision of
this Agreement, the Company shall have no obligation to issue any shares of
Common Stock under this Agreement if such issuance would violate any applicable
law or any applicable regulation or requirement of any securities exchange or
similar entity.
4.8 Successors and Assigns. This Agreement shall be binding upon any or all
successors and assigns of the Company.
4.9 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Michigan without
regard to principals of conflict of laws. Any proceeding related to or arising
out of this Agreement shall be commenced, prosecuted or continued in the Circuit
Court in Kent County, Michigan located in Grand Rapids, Michigan or in the
United Stated District Court for the Western District of Michigan, and in any
appellate court thereof.
****
We look forward to your continuing contribution to the growth of the
Company. Please acknowledge your receipt of the Plan and this Award on the
enclosed copy of this Agreement, and return it to us.
Date Very truly yours,
--------------------------------
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ACKNOWLEDGMENT OF RECEIPT
I acknowledge receipt of the Xxxxxxx Company 2003 Long-Term Incentive
Plan (the "Plan") provided to me on ___________________. I further acknowledge
receipt of this Long-Term Incentive Agreement and agree to the terms and
conditions expressed herein and in the Plan.
____________, 200_ ________________________________________
EMPLOYEE'S NAME
EXHIBIT A
PERFORMANCE GOALS FOR 200_ FISCAL YEAR
Threshold ___% Net Income Growth (external operating basis)
Target ___% Net Income Growth (external operating basis)
Maximum ___% Net Income Growth (external operating basis)
The Target Net Income Growth for subsequent fiscal years within the Performance
Period, and the level of performance necessary for Threshold and Maximum payout,
shall be determined by the Committee no later than 90 days after the beginning
of such fiscal year.
